Mike Wright

The departure of the banks has left an opportunity for advisers to pose as product manufacturers via managed accounts, with the spread of bespoke model portfolios and the potential for conflicts giving pause to researchers and leading to questions about the need for further regulation.

Speaking at the 2022 Professional Planner Researcher Forum Monday, Lonsec chief executive Michael Wright acknowledged the increase in advisers running their own managed discretionary account products, adding that he is wary of the potential for conflicts to arise.

“It is a fraught area,” Wright said. “We are cautious about who we engage with.”

While not criticising the practise itself, the CEO said Lonsec needed ensure the firms they dealt with walked a similar ethical line.

“We want to make sure they’re the right ones for us in any case and that it’s a philosophical fit,” he said.

The caution is warrented, Wright explained, because Lonsec is reticent to be accused of operating in an egregiously conflicted environment. While many advice firms got the conflicts piece right, he says, others missed the mark.

“I have concerns with some of the first movers in the space that really saw themselves as being able to set up a funds management business and potentially substantial revenues associated with that,” Wright said. “We could see further regulation focused on that particular issue.”

Managed accounts surged past the $100 billion in funds under management threshold last year as advisers looked to leverage the business efficiencies.

The corporate regulator has started paying extra attention to possible areas of conflict within managed accounts, however the project it had running was stalled by the pandemic.

No free lunch

Elsewhere during the ‘Changing Face of Research’ session, it was noted the delicate balancing act research heads have to walk to avoid conflicts.

Matt Olsen

Matt Olsen moved from Lonsec to Insignia Financial (formerly IOOF) as head of research in April 2018 and conceded the role can generate attention that needed to be properly managed.

“I try not to have a lunch policy,” Olsen. “Coming into the role there was a lot of invitations, but I don’t have enough time to do all that.”

“It’s better to try and be as independent as I can. I would try to have more of a business meeting. It’s just common sense really.”